Lars P. Syll o napačnosti predpostavke racionalnih pričakovanj v ne-ergodičnem svetu

Zelo dober pregleden članek Larsa P. Sylla o uporabi predpostavke racionalnih pričakovanj v makroekonomiji in o njeni napačnosti v realnem svetu ter problemu tega, da so ekonomisti zaljubljeni v traktabilnost matematičnih izpeljav, čeprav je osnova, na kateri gradijo, absolutno gnila in napačna. Larpurlartizem brez kakršnekoli uporabne vrednosti.

The concept of rational expectations was first developed by John Muth (1961) and later applied to macroeconomics by Robert Lucas (1972). In this way the concept of uncertainty as developed by Keynes (1921) and Knight (1921) was turned into a concept of quantifiable risk in the hands of neoclassical economics.

Muth (1961:316) framed his rational expectations hypothesis (REH) in terms of probability distributions:

Expectations of firms (or, more generally, the subjective probability distribution of outcomes) tend to be distributed, for the same information set, about the prediction of the theory (or the “objective” probability distributions of outcomes).

But Muth (1961:317) was also very open with the non-descriptive character of his concept:

The hypothesis of rational expectations does not assert that the scratch work of entrepreneurs resembles the system of equations in any way; nor does it state that predictions of entrepreneurs are perfect or that their expectations are all the same.

To Muth its main usefulness was its generality and ability to be applicable to all sorts of situations irrespective of the concrete and contingent circumstances at hand. And while the concept was later picked up by New Classical Macroeconomics in the hands of people like Robert Lucas and Eugene Fama, most of us thought it was such a patently ridiculous idea, that we had problems with really taking it seriously.

It is noteworthy that Lucas (1972) did not give any further justifications for REH, but simply applied it to macroeconomics. In the hands of Lucas and Sargent it was used to argue that government could not really influence the behavior of economic agents in any systematic way. In the 1980s it became a dominant model assumption in New Classical Macroeconomics and has continued to be a standard assumption made in many neoclassical (macro)economic models – most notably in the fields of (real) business cycles and finance (being a cornerstone in the “efficient market hypothesis”).

Keynes, genuine uncertainty and ergodicity

REH basically says that people on the average hold expectations that will be fulfilled. This makes the economist’s analysis enormously simplistic, since it means that the model used by the economist is the same as the one people use to make decisions and forecasts of the future.

This view is in obvious ways very different to the one we connect with John Maynard Keynes. According to Keynes (1937:113) we live in a world permeated by unmeasurable uncertainty – not quantifiable stochastic risk – which often force us to make decisions based on anything but rational expectations. Sometimes we “simply do not know.”

Keynes would not have accepted Muth’s view that expectations “tend to be distributed, for the same information set, about the prediction of the theory.” Keynes, rather, thinks that we base our expectations on the confidence or “weight” we put on different events and alternatives. To Keynes expectations are a question of weighing probabilities by “degrees of belief,” beliefs that have preciously little to do with the kind of stochastic probabilistic calculations made by the rational expectations agents modeled by Lucas et consortes.

REH only applies to ergodic – stable and stationary stochastic – processes. Economies in the real world are nothing of the kind. In the real world, set in non-ergodic historical time, the future is to a large extent unknowable and uncertain. If the world was ruled by ergodic processes – a possibility utterly incompatible with the views of Keynes – people could perhaps have rational expectations, but no convincing arguments have ever been put forward, however, for this assumption being realistic.

REH holds the view that people, on average, have the same expectations. Keynes, on the other hand, argued convincingly that people often have different expectations and information, and that this constitutes the basic rational behind macroeconomic needs of coordination. This is something that is rather swept under the rug by the extreme simple-mindedness of assuming rational expectations in representative actors models, which is so in vogue in New Classical Economics. Indeed if all actors are alike, why do they transact? Who do they transact with? The very reason for markets and exchange seems to slip away with the sister assumptions of representative actors and rational expectations.

Mathematical tractability is not enough

It is hard to escape the conclusion that it is an enormous waste of intellectual power to build these kinds of models based on next to useless theories. Their marginal utility have long since passed over into the negative. That people are still more or less mindlessly doing this is a sign of some kind of not so little intellectual hubris.

It would be far better to admit that we “simply do not know” about lots of different things, and that we should try to do as good as possible given this, rather than looking the other way and pretend that we are all-knowing rational calculators.

Models based on REH impute beliefs to the agents that are not based on any real informational considerations, but simply stipulated to make the models mathematically-statistically tractable. Of course you can make assumptions based on tractability, but then you do also have to take into account the necessary trade-off in terms of the ability to make relevant and valid statements on the intended target system. Mathematical tractability cannot be the ultimate arbiter in science when it comes to modeling real world target systems. Of course, one could perhaps accept REH if it had produced lots of verified predictions and good explanations. But it has done nothing of the kind. Therefore the burden of proof is on those who still want to use models built on ridiculously unreal assumptions – models devoid of obvious empirical interest.

In reality REH is a rather harmful modeling assumption, since it contributes to perpetuating the ongoing transformation of economics into a kind of science-fiction-economics. If economics is to guide us, help us make forecasts, explain or better understand real world phenomena, it is in fact next to worthless.

Preberite celoten članek v Lars P. Syll, Rational expectations — a fallacious foundation for macroeconomics in a non-ergodic world, Real-World Economics review no. 62

One response

  1. Najprej: “According to Keynes (1937:113) we live in a world permeated by unmeasurable uncertainty – not quantifiable stochastic risk […]”

    Nato: “Keynes, rather, thinks that we base our expectations on the confidence or “weight” we put on different events and alternatives.”

    In za polno mero: “To Keynes expectations are a question of weighing probabilities by “degrees of belief,” beliefs that have preciously little to do with the kind of stochastic probabilistic calculations made by the rational expectations agents modeled by Lucas et consortes.”

    Matematika mogoče res ne pomaga ekonomiji, vsekakor pa osnovno znanje matematike ekonomistom pomaga, da ne pišejo nesmislov, kot je uspel tukaj Syllu. Če to hočejo, seveda.

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